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Proposal 1 Proposal 2 Cost 950 000 1 150 000 Installation costs 50 000 95 000 Maintenance costs - 30 000 Estimated life span 5
Proposal 1 | Proposal 2 | ||
Cost | 950 000 | 1 150 000 | |
|
|
| |
Installation costs | 50 000 | 95 000 | |
Maintenance costs | - | 30 000 | |
Estimated life span | 5 years | 5 years | |
Net cash flows | 300 000 | 95 000 | |
Market value at the end of 5 years | 300 000 | 450 000 | |
Tax depreciation | 15% on a straight line | 15% on a straight line | |
Tax rate | 28% | 28% | |
Cost of capital | 8% | 8 |
1. Compute NPV and IRR for Project 1 and Project 2
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